UK insurer Aviva battles to fend off activist Cevian by promising investors a £4.75bn payout
Aviva has vowed to return £4.75billion to investors as it fends off its activist shareholder.
The British insurer plans to distribute £3.75billion through a ‘B share scheme’ – which comes on top of the £1bn share buyback announced last year.
Since chief executive Amanda Blanc took over in 2020, she has been selling Aviva’s overseas businesses to focus on the UK. She has offloaded eight branches, from Italy to Vietnam, raising £7.5billion.
Shake-up: Aviva boss Amanda Blanc has been selling Aviva’s overseas businesses to focus on the UK. She has offloaded eight branches, from Italy to Vietnam, raising £7.5bn
But her efforts attracted the attention of activist investor Cevian, which bought a stake and began lobbying it to funnel more cash to its investors.
As Blanc unveiled the 2021 results, announcing that 22,000 employees would be given £1,000 of shares as a bonus, she said all of the £7.5billion would be returned to investors.
Blanc hiked the dividend for 2021 by 5pc to 22.05p, and promised a rise to 31.5p next year and to 33p in 2023.
This fell short of Cevian’s demand that Aviva more than double its payout to 45p.
Cevian partner Niko Pakalen said the firm now ‘has the capacity for a 50p per share total cash return to shareholders for 2024’.
Aviva profits slipped 10 per cent to £1.6billion last year as strong performance in its general insurance business was dragged down by life insurance.
Blanc said: ‘We’ve done what we said we would do, but we are only just getting into our stride.’
She plans to cut costs by £400million by the end of 2024, up from a previous goal of £300million by the end of 2022, but short of Cevian’s £500million target.
Part of this will be done by moving its London HQ to a smaller building, as flexible working means staff only come in three days a week.
Aviva also announced it was buying Succession Wealth for £385million, becoming the latest financial services firm to branch into new areas to hold on to more customers.
It currently estimates that around £6billion, which Aviva customers would spend with the firm if they could, is lost to its competitors.
Pakalen praised Blanc’s efforts and said Aviva’s ‘transformation has still not been recognised by the market and the company remains one of the cheapest insurance companies in Europe’.
But he added that Aviva must demonstrate that it can become more profitable and fast-growing, and translate this into ‘growing and predictable dividends’.